Over the past 15 years the pharmaceutical market has increasingly developed and released specialty drugs, which are primarily prescribed by specialists and have very high monthly costs. In response, insurers have been shifting more of the costs to patients by placing these drugs on the highest cost-sharing tiers (referred to as specialty tiers). The Medicare Prescription Drug Benefit Program (Part D) defines a specialty drug as having a negotiated price greater than a fixed amount (currently $600 per month). This project will use plan-level aggregate data and individual Part D claims data to examine the effect of specialty tier placement on enrollment and utilization decisions by Medicare beneficiaries; and expenditures by both beneficiaries and plans. The first objective is to examine the effects of specialty tier placement on plan enrollment, enrollment of high-risk patients, and by implication, market share. The first analysis is a fixed effects estimation of the association between market share and percent of drugs on the specialty tier. This analysis will provide initial evidence as to trends in plan market share over time as a function of tier placement. The second analysis will estimate the likelihood of switching plans if a specialty drug is placed on the specialty tier. The second objective is to examine the effects of specialty tier placement on utilization of specialty drugs, condition on enrollment. Two analyses will estimate the likelihood of initiating treatment based on the tier placement decision and the total number of specialty drug prescriptions filled as a function of tier placement. These analyses will shed light on the presence of moral hazard in the utilization of such drugs. The third objective is to examine the effect of specialty tier placement on expenditures by both plans and beneficiaries. An analysis of the overall effect on costs will estimate the effect on both plans and beneficiaries of specialty tier placement, and a quasi-elasticity of demand estimate for specialty drugs will also be calculated. The results will provide additional information regarding the extent to which specialty tiers shift costs to patient, as well as whether Part D protects patients from very high spending. Results of this research will provide policymakers with information on the effects of specialty tier placement on enrollment, utilization, and expenditures. These results will be useful for plans seeking to better understand the effects of such specialty tier placement on their market share and expenditures, as well as for the designers of Part D benefits. This research meets the AHRQ missions of efficiency and effectiveness, in that results are expected to provide researchers and policymakers with additional evidence regarding the choices Medicare beneficiaries make in response to tier placement of very expensive medications. In turn, the results could be used to better inform plans and policymakers as to the appropriate design of benefits for specialty drugs, so as to ensure access to these medications. ! PUBLIC HEALTH RELEVANCE: This dissertation will examine the effect of specialty tier placement on enrollment and utilization in the Medicare Prescription Drug Benefit Program (Part D). The project will use aggregate plan-level and individual claims data to estimate effects on market share, enrollment, utilization, and expenditures due to placement of expensive specialty drugs on the specialty tier. Results of this research may help inform policymakers as to whether or not specialty tier placement results in reduced utilization and lower market share amongst competitive plans in the Part D benefit, and provide further information as to the extent to which the Part D benefit design encourages such tier placement decisions.